Documenting Minnesota’s Progress with an Evolving Electric System

Less than four years ago, the Center for Energy and Environment and the Great Plains Institute launched the e21 Initiative, a multi-stakeholder collaboration brought together to find ways to help Minnesota’s utilities and regulators adapt to our changing electric system and align the utility business model with the public interest.

Minnesota utilities, much like utilities across the nation, were experiencing historically flat load growth at a time when they were also being asked to invest in aging infrastructure, reduce environmental impacts of energy production, accommodate new and disruptive technology, and meet changing customer expectations. While change is never easy, it was clear that not changing was a losing proposition. The e21 process provides a model for how states can create a path for change to meet the challenges of our evolving electric system.

The e21 Initiative created a space for open sharing and rigorous debate outside of the state’s formal regulatory process, to help facilitate a more honest and creative conversation about how to deal with the challenges of our changing electric system. The e21 Initiative started with Phase I, to identify broad-based principles and recommendations for regulatory and business model reforms. And Phase II of the initiative allowed stakeholders to dive more deeply into three important topic areas identified through the work of Phase I — performance-based regulation, grid modernization, and integrated systems planning. Finally, Phase II resulted in three detailed white papers with a number of specific and actionable recommendations. Minnesota has made notable progress toward many of the broad Phase I recommendations, as well as the more detailed and topic-specific recommendations of Phase II.

This progress was possible due to the committed engagement of e21 stakeholders and the willingness of Minnesota’s regulators to take on complex and challenging issues around our changing electric system. In just four years Minnesota has made significant steps toward a more customer-centric and sustainable utility framework, with an emphasis on utility performance, our evolving electric grid, and new innovative strategies worth embracing.

Performance and value 

Early on, stakeholders recommended establishing a “multiyear performance-based regulatory framework” for any utility who wanted to opt-in. Later, the collaborative issued a white paper about performance-based utility compensation and regulation, aligned with several regional changes. Since then, Minnesota policymakers, utilities, and regulators have taken action.

• In 2015, Minnesota’s Legislature passed a bill allowing utilities to opt into a multiyear rate plan (MYRP) of up to four years, and allowing the Minnesota Public Utilities Commission (MPUC) to establish performance metrics and incentives.
• In November that year, Xcel Energy filed for a multiyear rate plan, and received approval in June 2017 for a four-year plan.
• In September 2017, the MPUC opened a docket to consider performance metrics and incentives to apply to Xcel Energy. An e21 roundtable filed discussion summaries with the MPUC about issues raised in the docket; the docket is ongoing.

And what’s performance without value? Stakeholders recommended that the MPUC establish clear methods for determining the value of distribution energy resources among grid services, a precursor to:

• New legislation in 2015 that required any utility with a multiyear rate plan to conduct a “distribution study,” identifying interconnections on its distribution system for small-scale distributed energy resources, as well as needed upgrades to support new distributed generation resources.
• Xcel Energy filed a Hosting Capacity Analysis for distributed energy resource installation, a first step toward locational valuation of distributed energy resources on Xcel’s system.
• In 2016, the MPUC opened a docket to update the standards for interconnection and operation of distributed generation, and created a workgroup to work through those standards. In 2018, the MPUC approved updates to the interconnection process.

Grid modernization 

In the Initiative’s first phase, e21 stakeholders recommended developing a “transparent, forward-looking, integrated process” to modernize Minnesota’s electric grid, and later issued a related white paper with more detailed strategies, leading to:

• Legislation requiring utilities with multiyear rate plans to identify investments needed to modernize transmission distribution. Xcel filed distribution grid modernization reports in 2015 and 2017.
• In 2015, the MPUC opened a docket to investigate grid modernization. MPUC staff issued a related report in March of 2016, specifying a number of key principles.
• In June 2018, MPUC issued proposed requirements for annual utility integrated distribution planning filings; utilities will begin filing plans in late 2018 and Xcel is currently conducting stakeholder engagement meetings to inform its plans.

With a keen eye on customers, e21 also made an early recommendation to find and develop opportunities to “reduce customer costs by improving overall grid efficiency.” In line with this, the MPUC required both Xcel Energy and Minnesota Power to plan for additional demand response on their systems. Xcel is currently working through an e-21 facilitated stakeholder process to determine how best to meet their demand response requirement.

Innovation 

For lasting change, we’ll need to build on past success while embracing emerging approaches when feasible. In e21’s first phase, stakeholders recommended that the MPUC review and adjust time-varying rates for energy services, to “send more accurate and effective price signals.” Informed by that frame:

• Xcel worked through an extensive stakeholder process, facilitated by CEE and GPI, to develop and file a residential time-of-use rate pilot, and in May 2018 the MPUC approved Xcel’s pilot.
• Minnesota Power is in the process of developing its own time-of-day rate pilot proposal, with stakeholder engagement meetings facilitated by e21.

Such pilots are essential to ensure strategic exploration and innovation with minimal risk. In fact, e21 stakeholders explicitly encouraged the use of pilot programs to test and evaluate components of a multiyear, performance-based framework, including service options, products, and technologies. In turn, Xcel Energy has filed for a number of additional pilots with focuses ranging from residential electric vehicles to low-income community solar gardens and a Renewable Connect green tariff.

Across the board, the e21 Initiative has underscored the urgency for innovation, calling to revise Minnesota statutes in an effort to enable “innovative product and service options and technologies.”

Phase III begins 

In our third phase, this year we continue our focus on honest sharing, stakeholder engagement, and collaboration to support a 21st-century energy system. If our first four years are any indication, now’s a good time to keep an eye on Minnesota’s progress.

This blog originally appeared on CEE’s website at mncee.org

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